Tight supply and surging energy costs caused fertilizer prices to soar last month. Furthermore, advanced farming techniques and the increasing use of bio-fertilizers are driving the growth of the fertilizer industry. Therefore, we believe recent price dips could be an opportune time to bet on fundamentally sound fertilizer stocks CVR Partners (NYSE:UAN) and Intrepid (IPI). Read on.Surging energy costs, scarcity of supply, imperfectly competitive and shallow market structure and trade policies have driven fertilizer prices near-record highs this year. According to a report by DTN, the average price of nitrogen, which is the most widely used category of fertilizer, was $1,308 per ton for the first time ever last month.
Furthermore, the World Bank reported that fertilizer prices on average would be 25% higher in 2021 than last year. In addition, the development of advanced farming techniques, expanding trade activities, and increasing use of bio-fertilizers are fueling the growth of the fertilizer industry. The global fertilizer market is expected to grow at a 4% CAGR through 2026.
Therefore, we think fundamentally strong fertilizer stocks CVR Partners, LP (UAN), and Intrepid Potash, Inc. (NYSE:IPI) could be ideal picks now to capitalize on the industry’s solid growth prospects. The recent price dips in these stocks offer a perfect entry point to lock in potential gains in the coming months.